MINUTES IOWA LOTTERY BOARD

Transcription

1 MINUTES IOWA LOTTERY BOARD September 29, 2011 The Iowa Lottery Board convened at 10:30 a.m., Acting Chair Brad Schroeder presiding. Board members participating: Michael Klappholz, Brad Schroeder, Deb Burnight (via conference call), Mary Junge. Absent: Herman Richter, Michael Fitzgerald. Lottery staff present: Terry Rich, CEO; Kenneth Brickman, Executive Vice President/COO; Teri Wood, Vice President Marketing; Brenda Loy, CFO; Larry Loss, Vice President Sales; Mary Neubauer, Vice President External Relations; Molly Juffernbruch, Vice President Legal Counsel; Steve Bogle, Acting VP Security; Dave Van Compernolle, Assistant Attorney General; Jack Schroeder, CIO; and Jamie Becker, Board Secretary. Others present: Rod Boshart Cedar Rapids Gazette; Kristi Kielhorn House Representatives; Dar Danielson Radio Iowa Acting Chairperson Schroeder called the meeting to order and noted that some board members were participating by means of a conference call, with the provisions of Iowa code section 21.8 governing the conduct of electronic meetings in effect. A meeting with all members in attendance in person was impractical due to board members personal scheduling conflicts. The meeting originated from the Lottery headquarters in Des Moines and public notice of the meeting was given pursuant to Iowa Code section 12.4, with public access to the conversation of all participants provided by means of speakerphone for the benefit of all in attendance at the meeting site. Junge moved to conduct the meeting by electronic means. The motion was seconded by Klappholz and carried unanimously. Minutes Klappholz moved to approve the minutes of the meeting held on June 20, The motion was seconded by Junge and carried unanimously. Monthly Reports Written reports were included in the agenda packet. Staff members reviewed the information and responded to questions from Board members. Financial Brenda Loy stated that the final June FY11 reports were included in the packet and stated that the lottery ended the year with over $68 Million in transfers to the state. Loy stated the 5 year summary was also included the packet, as well as the July FY12 report. As of July the lottery is well ahead of budget for sales and proceeds. Loy stated that August financials are finished and that the lottery stayed ahead of last year. Auditors will be at the lottery headquarters next week to conclude FY11 and Loy expects the auditors to wrap up their findings in January Junge inquired as to what the big contributor was for the hike in sales numbers, Loy and Rich replied that instant tickets are selling well, advertising costs are down and the prize expense is within range. Rich stated that Iowa had the 2nd largest increase in sales 1

2 while Arizona was first. Rich added that a lot of different factors contributed to the increase in numbers. Loy continued with the financial report stating that the budget for FY13 information was included in the packet and was based on FY11 actuals. Loy noted that the increased sales numbers are due to the $2 PowerBall that will be in place in January. The report also shows a change in prize expenses. The overall percentage is in line with FY11 and includes costs for VIP Club and an increase in sales which is primarily due to the $2 PowerBall with a payout that is lower than scratch tickets. Loy stated that the lottery plans to go out for bid for ticket vending machines later this year and expects to incur some costs for those vending machines. Loy continued, stating that the 2nd page includes operating costs for salaries and that the lottery will come back to board in June, as it always does, for salary increases. DSR communication devices are still included and training is now included in the professional fees line. The lottery has money earmarked for building maintenance, as well. Loy then asked the board for approval of FY13 budget separately from monthly reports. June moved to approve the FY13 proposed budget. The motion was seconded by Klappholz and it carried unanimously. Marketing Teri Wood began by presenting materials for Monopoly, the first licensed game offered in the lottery s VIP Club. The Monopoly promotion ran from July 18 through Aug 31st and had 41,773 entries for the Great Iowa Getaway prizes (8 Iowa locations). Wood then showed the TV commercial supporting the monopoly promotion. In addition to the TV commercial, the lottery used new LIMs (Lottery In Motion) with ads running at 2,400 retailers around the state. Winners were featured on the LIMs. Wood stated that the Iowa Lottery had a presence again this year at the Iowa State Fair, which ran from August 11 through August 21 where the lottery was able to showcase new terminals and LIMs and promote the VIP club with the help of the VIP Club vendor. The Lottery used LIMs, a monopoly ticket promotion, and gave away VIP club promo cards at the fair. Traditional TV or radio was not used for the fair, however print advertising, daily appearances on radio shows, social media, website and onsite signage were used. Wood continued with describing the new fall sports themed initiative that has begun with all 3 state universities Great State Tailgate. This promotion includes the chance to win a tricked out tailgate which is being showcased on campus at several Iowa, Iowa State and UNI games. The lottery is not selling or giving away tickets at these events. Players can win the tailgate by entering nonwinning Great State Tailgate tickets into the VIP Club. The lottery is now 4 weeks into this promotion and has received over 30,000 entries. The Great State Tailgate ticket is ranked #12 out of 36 $2 games. Wood then presented the TV commercial. Wood noted that the last 2 commercials shown were mostly using computer generated images and is a more cost effective method of producing commercials. This promotion has been supported with TV, traditional and sports radio, outdoor, social media and geotargeted LIMs. Geo-targeting is advertising that is played in specific areas that may have an event coming up. 2

3 Wood then moved on to discuss the holiday promotion. Wood stated that for the last two years Tech the Halls was the lottery s holiday promotion. The first year of this promotion the lottery had 450,000 entries. Last year that number was doubled with 844,000 entries. This year the lottery is doing SuperTech which features new Sony prizes and a chance to win a Super Prize. Players must be a member of the VIP Club to enter. Wood noted that TV, radio, POS, LIMs, social media and 15 retailer events with radio stations at retailer locations will be used to support this promotion. Wood commented that the advertising contracts will expire at the end of 2012 for media and creative and the Lottery will go out to bid. The committee has been formed. Research analysis is on phase II where 9 focus groups will be conducted. Wood stated that this analysis will be completed by the end of the year and the board will receive a baseline analysis report. External Relations Mary Neubauer stated the there was a handout which was included in the board packet that was presented to fiscal committee last month. Neubauer said there had been some discussion at the house regarding advertising by the state departments to look at the amounts being spent on advertising. The concern was mostly about smaller entities and wanted to make sure the state s marketing dollars are being spent efficiently. There was talk about having 1 ad agency for all state entities but the state marketing committee felt that solution would end up costing the state more due to loss of competition. The legislature ultimately understood and accepted that each state department has different expertise and different needs and having 1 agency wouldn t work. Neubauer stated that Terry Rich and Jamie Becker have coordinated regular meetings with state marketing directors and managers and a distribution/contact list was compiled for reference. Another meeting is planned for October and this group will continue to meet and keep legislature advised. Neubauer moved on to discuss the VIP Club saying that as of this morning the VIP Club has more than 23,200 members. All promotion initiatives have had an impact on the numbers and SuperTech is expected to bump those numbers even more. Neubauer mentioned that the VIP Club promo cards are being handed out at the college football games and have seen the numbers jump after the weekend. Neubauer stated that the VIP Club is like the frequent flyer program and that every nonwinng scratch ticket is worth points and those points can be used to buy products. Deb Burnight joined the meeting via conference call at 11:09am. Neubauer continued the External Relations report stating that a college fan shop was recently added to the VIP Club where college merchandise can be bought with points and has proved to be very popular with players. Neubauer added that the VIP Club is also good for litter control as people want to keep their nonwinning tickets to enter for prizes and second chance drawings. Neubauer moved on to discuss the still unclaimed jackpot. Neubauer mentioned that she had sent a link to a youtube video to the board members. The unclaimed jackpot story went national last week including coverage by CNN and Neubauer pointed out that 3

4 there have been only 6 larger lottery prizes that have gone unclaimed from other states. The lottery has placed a countdown clock at the headquarters and will put 1 at the store where the ticket was sold. Although several people have called the lottery about the unclaimed jackpot, no one who has contacted the lottery has the actual ticket. If the jackpot remains unclaimed the money will go into future prize pool for future games and it was noted that the lottery may hold a special promotion next spring if it remains unclaimed. Security Report Steve Bogle reported that the last 3 months security reports are included in the board packet and that it was all pretty routine with the exception of, thanks to the national unclaimed jackpot story, security has started receiving calls from around the country. Bogle stated that sometime this summer the network ran a story about unscrupulous retailers and the lottery received several calls from concerned players. After investigating, the players were assured that they had been paid correctly. Bogle stated that this is common whenever there is national coverage about lottery retailers scamming players. Klappholz moved to approve the monthly reports, Junge seconded and the motion carried unanimously. Fiscal Policy Updates Brenda Loy stated that 8 policy updates were included in the packet and that the lottery was trying to mirror DAS policies, stating that DAS has updated their policies so the lottery has either updated or is requesting removal of lottery policies to be replaced by DAS policies. Loy asked that policies and be deleted and DAS s policy be adopted. Loy stated the other 6 policies have bullets describing changes. Loy pointed out that now an overnight stay is required for meal reimbursement and the authorized stay change is for out of state travel which now requires Terry Rich s approval. These changes are needed and the implementation dates are different. Loy noted that the effective date is reflected on each of the policies. All changes requested are to conform to DAS s policies. Loy asked that the board approve the policies and effective dates of those policies. Junge moved that the 2 policies so stated be removed and the DAS policy be used and the other 6 policies be updated to conform with DAS policies. Klappholz seconded the motion and it carried unanimously. CEO Update Terry Rich stated that the packet included the Lottery s 5 year plan, which was requested by the new administration of all state directors. Rich mentioned some highlights stating that the new paradigm will be modernization to go into the next 10 years. Rich stated that the Pull Tabs have reached maturity and is declining in sales each year but is still strong at $18 million/year. Scratch tickets have been stable and strong and continues to grow and the courier system will help even more with sales. Lotto tickets are $94 million and Powerball 2 is set to begin January 18. There will be also be a $5 national game next fall. Rich stated that 75% of lottery sales come from c-stores and that the top 20% of our retailers sell 51% of our product while the bottom 50% sells 14%. Rich noted that high fuel prices and casino expansion have the biggest potential negative impact on the lottery. 4

5 Rich discussed the Lottery s current priorities and stated that there has been a lot of discussion with employees. Future priorities include using best business practices, diversification of retail base, and communications and merchandise payouts through VIP Club and loyalty program. Cross validation for Pull Tabs and new lotto products were mentioned as was electronic delivery, consumer trends and the buzz about internet gaming. Rich stated that 5 years from now there will be a lot of internet gaming and we will advise or make suggestions to the state/governor s office on internet gaming as needed and will keep the board up to date. Rich also mentioned that the lottery is talking to DNR about hunting and fishing licenses and looking into how having access to 2,500 retailers can help the state in other ways. Rich stated that getting the state $60 million is the bottom line. Rich moved on to give the conversion update noting that things are going well, with some minor hiccups along the way. Rich recognized the efforts of many lottery staff members who helped make the conversion a success. Rich stated that today a release will go out about an iphone lottery app that is now available for the iphone3gs and higher noting that the lottery is not selling tickets through this app. Apps are coming for other smartphones soon. Klappholz stated that using technology to cross over with other departments is important in the state and hope these discussions continue. Burnight stated this would be a good way for people to get used to interacting electronically and is a good step for a change in player behavior. Organization Realignment Rich stated that Ken Brickman announced at the annual meeting that he will be retiring in January after many years with the Iowa Lottery. Ken began in Illinois then moved on to Louisiana and eventually came to the Iowa Lottery in Rich stated that Ken has been an anchor in the day to day operations and has been extremely loyal. Brickman addressed the board stating that it s been a great run and has enjoyed it. He stated that the Lottery is in his blood and enjoyed his time in Illinois and Louisiana but Iowa was the crowning jewel in his career and pleased and proud that he was accepted as part of the team, grew with the lottery and had the opportunity to serve under Ed Stanek and Terry Rich. Brickman noted that he was treated exceptionally well, by senior staff especially. Rich then stated that there will be a formal date set for accolades and he wanted to point out that Ken stepped in as the interim CEO at a difficult time and to recognize this the lottery has put together a display of photos of lottery directors to be displayed in the lobby and Ken s photo will be included in that. Thanks was expressed by Junge for a job well done, Schroeder also thanked Ken saying that he did an outstanding job at the Iowa Lottery. Rich then stated that there is a hole to be filled with Ken s retirement and that a new org chart was submitted to the board. Rich noted that the lottery will not increase the number of management and will shift Larry Loss to Executive Vice President, Sales and Product Development. Loss will be second in command and will oversee all product, sales and distribution. A Manager of Retail Sales position was added along with a new Vice President, Operations and Systems position overseeing IT, Draw Staff and Purchasing. Further discussions will be held in closed session. 5

6 Klappholz moved that the proposed organizational realignment be approved as presented, effective December 23, 2011, subject to the following provisions: 1. That newly-created titles as proposed in the realignment be established and assigned within the Lottery Key Executive Pay Plan as follows: Lottery Executive Vice- President/Sales & Product Development position at Pay Grade 04; Lottery Vice- President Operations & Systems at Pay Grade 02; the Lottery Director of Retail Services at Pay Grade 01; and the Lottery Senior Project Director/Board Secretary at Pay Grade 00; 2. That the following, current key employee titles be abolished effective end of day December 22, 2011; Lottery Vice-President Sales; Lottery Executive Secretary; and that the current Lottery Executive Vice President, Chief Operating Officer position be abolished, but retained with the incumbent for transitional purposes until the end of day January 5, 2012; 3. That the CEO be authorized to reassign current Key Employee executive staff pursuant to the realignment organizational chart, with the concurrence of the Iowa Lottery Board Chair and to initiate the hiring process with respect to any resulting vacancies. Junge seconded and the motion carried unanimously. Key Employee Pay Plan update Rich stated that the Key Employee Pay Plan was drafted to be discussed in closed session and approve in open session. Rich announced that Ken Moon and Roger Mott both announced their upcoming retirements as well. Schroeder stated The Chair is advised that the CEO has a matter to discuss with the Board within the parameters of Iowa Code Chapter 21.5(1)(i); that the matter pertains to compensation of noncontract and Key Employees and that the affected individuals have tendered written requests that any such review be conducted in closed session, as provided by law. The chair notes that a vote is required during the public portion of the meeting prior to entering closed session. The Chair will now entertain a motion to go into closed session pursuant to Iowa Code Chapter 21.5(1)(i) which provides for closed session: to evaluate the professional competency of individual(s) whose appointment, hiring, performance or discharge is being considered when necessary to prevent needless and irreparable injury to the individuals reputation and the individual(s) requests a closed session. Junge moved to go into closed session. Burnight seconded. Roll call vote Burnight - aye; Junge -aye; Klappholz aye; Schreoder aye Closed session begins at 11:46am Larry Loss, Ken Brickman, and Dave Van Compernolle remained present in closed session. Closed session ended at 12:19pm; Open session resumed at 12:29pm Schroeder stated that the Chair would entertain a motion to approve the Key Executive Pay Plan. 6

7 Junge moved that Pay Grade 00 of the Lottery Key Executive Pay Plan be changed from a range of $39, minimum and $60, maximum to $53, minimum and $82, maximum and Pay Grade 01 of the Lottery Key Executive Pay Plan be changed from a range of $58, minimum and $88, maximum to $59,488 minimum and $91, maximum plus adjustments for cost of living increases effective December 23, 2011 and as may hereafter be adjusted by comparison to any cost of living increase authorized by the legislature and Governor for state noncontract employees. Klappholz seconded and it carried unanimously. Schroeder stated that the Chair would entertain a motion to approve the Key employee salary adjustments. Junge moved that the Key employee Compensation increases be approved effective December 23, 2011 or upon the employee s next review date whichever occurs first; that they be within the applicable ranges for the respective positions; be based on performance and be determined by the CEO in consultation with the Board Chair, representing the Board. Burnight seconded. Discussion Rich stated that anniversary dates and cost of living adjustments need to be considered and noted that there is a 1% cost of living increase (COLA) effective December 23, The ranges listed on the handout did not include this COLA and they should be adjusted to reflect the 1% COLA effective on December 23, Loy stated that the motion that was made and passed in the last board meeting stated... and as may hereafter be adjusted by comparison to any cost of living increase authorized by the legislature and Governor for state noncontract employees be adopted; that applicable ranges be based on performance and be determined by the CEO in consultation with the Board Chair representing the Board. Klappholz asked that Junge s motion be amended to clarify and include the December 23, 2011 cost of living increases to the Key Employee Pay Plan Ranges and the language and as may hereafter be adjusted by comparison to any cost of living increase authorized by the legislature and Governor for state noncontract employees be adopted. Junge seconded the motion to amend and it passed unanimously. Schroeder stated that now a vote was needed on the amended motion. Rich added that it is his intent that these changes for key employees will not increase the number of management staff and the total compensation package for the management group will be at least the same, if not reduced. The Chair asked for all in favor to say aye and the motion passed unanimously. Election of officers Junge moved to nominate Brad Schroeder as Board Chair for current fiscal year. Klappholz seconded the motion and it carried unanimously. Klappholz moved to nominate Mary Junge as the Vice Chair. Burnight seconded and it carried unanimously. 7

8 Rich clarified that the election of officers is usually held in June rather than September and the board wishes to continue with elections in June. Meeting adjourned at 12:40pm 8